Behavioral Operations

by Francesca Gino & Gary P. Pisano

Executive Summary — Organizations often commit to more product development projects than they can handle. And while people do not always behave rationally, most research on operations management still assumes they do. This paper explores theoretical and practical ways to study the effects of behavior and cognition on operations. Key concepts include:

Recognize the role of common cognitive biases such as wishful thinking, overconfidence, and procrastination in order to understand and solve chronic problems in operations management.

Such knowledge may help improve the operating systems that people design, implement, and use.

Author Abstract

In the vast majority of operations, people are a critical component to the functioning of the system and influence both the way operating systems work and how they perform. Yet most formal analytical models in operations assume that the humans who participate in operating systems are fully rational or at least can be induced to behave rationally. Many other disciplines, including economics, finance, and marketing, have successfully incorporated departures from this rationality assumption into their models and theories. In this paper, we argue that the scholars within operations management should do the same. We highlight initial studies that have adopted a "behavioral operations perspective", and we explore the theoretical and practical implications of incorporating behavioral and cognitive factors into models of operations. Specifically, we address three questions: 1) what is a behavioral perspective on operations? 2) what might the intellectual added value be of such a perspective? 3) what are the basic elements of behavioral operations research?